Mallinckrodt Pharmaceuticals is an Irish–tax registered manufacturer of specialty pharmaceuticals (namely, Acthar), generic drugs and imaging agents,[2] that generated 90% of 2017 sales from the U.S. healthcare system. While Mallinckrodt is headquartered in Ireland for tax purposes, its operational headquarters is in the U.S.[3] Mallinckrodt's 2013 tax inversion to Ireland drew controversy when it was shown their main drug Acthar, was Medicaid's most expensive drug.[4]

Mallinckrodt acquires (for repricing), manufactures, and distributes products used in diagnostic procedures and in the treatment of pain and related conditions. This includes the acquisition, manufacture, and distribution of specialty pharmaceuticals, active pharmaceutical ingredients, contrast products, and radiopharmaceuticals.[5] The company employed 5,500 and had net sales of $3.2 billion in 2017; of which $2.9 billion was from the U.S. healthcare system.[5]

Contents

In 1867, the Mallinckrodt brothers, Gustav, Otto and Edward, founded G. Mallinckrodt & Co. in St. Louis, Missouri.[6] The Mallinckrodt family had immigrated from Germany, and Otto and Edward both returned to Germany, the leader in chemistry at the time, for advanced training.[7] Mallinckrodt Chemical Works was incorporated 15 years later. By 1898, the company had established itself as a pharmaceuticals supplier and in 1913 became the first to introduce barium sulfate as a contrast medium for x-rays.[6] In part due to early success in production of radiology agents, and at the behest of surgeon Evarts Graham, Edward Mallinckrodt Sr. assigned one of the company's top chemists to collaborate in developing the first radiographic agent for gallbladder and bile duct imaging.[8] A posthumous endowment by Edward Mallinckrodt Jr. on behalf of his father to the Washington University medical school radiology department resulted in the creation of the Mallinckrodt Institute of Radiology.[9]

2017 – In September, Mallinckrodt acquired specialty pharmaceutical company, InfaCare Pharmaceutical Corporation.[28] In November the company announced its intention to acquire Ocera Therapeutics for up to $117 million.[29] In late December the company announced it would acquire Sucampo Pharmaceuticals Inc for around $840 million, gaining control of constipation drug - Amitiza and a number of experimental rare disease treatments.[30]

In December 2018 the company announced it will spin off its specialty generics business into a separate publicly traded company, initially owned by existing Mallinckrodt shareholders. The division generated $840 million in 2017 and the deal will also include constipation drug, Amitiza. Chief Financial Officer, Matthew Harbaugh, will head the new company which will retain the Mallinckrodt name. The remaining business of specialty branded products will be renamed and led by current Chief Executive Officer, Mark Trudeau.[31]

In 2013, Mallinckrodt executed a corporate tax inversion to Ireland to avoid U.S. corporate taxes, by acquiring Irish-based Cadence Pharma for $1.3 billion.[32] This was despite the fact that almost all of Mallinckrodt's revenues come from the U.S. market (see table below). In 2015, Mallinckrodt was one of a number of U.S. tax inversions that the Wall Street Journal reported to be using their lower tax-platform to acquire further U.S. pharmaceutical firms, such as the $5.6 billion acquisition of Questor in 2014.[33] In December 2015, the Irish Times reported the CEO as saying that "It’d have to be a pretty dramatic change to the US tax code" for Mallinckrodt to return to the U.S., and that "We’re already foreign domiciled, so we may as well take full advantage of it".[34]

In February 2018, Mallinckrodt told the Wall Street Journal that it would get a $450 to $500 million tax credits from the Tax Cuts and Jobs Act of 2017 (TCJA), but that some of these benefits would be offset by the anti-inversion provisions of the TCJA.[35] In April 2018, Mallinckrodt's Irish tax inversion came under further scrutiny when it was revealed that Mallinckrodt's main drug Acthar, was one of the most expensive drug-related expenditures for the U.S. Medicare programme.[36]

Acthar gel, an injectable biopharmaceutical used for the treatment of infantile spasms, acute exacerbations of multiple sclerosis, and certain orphan diseases. Mallinckrodt acquired this product via its acquisition of Questcor Pharmaceuticals in 2014.[38] When Questcor acquired the drug in 2001 it sold for $40 a vial; within a year of the acquisition Questcor raised the price of the drug to $1,500 per vial and to $28,000 by 2013.[39] In 2013, Questcor acquired the US rights to a competing product, Synacthen Depot, from Novartis.[39] In 2014 Mallinckrodt raised the price of Acthar further to $34,000.[40] The Federal Trade Commission and attorneys general from five states sued Mallinckrodt for anti-competitive behavior with regard to the acquisition of Synacthen Depot and the monopolistic pricing of Acthar, and in January 2017 the company settled, agreeing to pay $100 million and to license Synacthen Depot to a competitor.[38]

Ofirmev is a proprietary IV formulation of acetominophen used in conjunction with opioid painkillers in the post surgical setting.

Xartemis XR is a controlled release oral combination of acetominophen and oxycodone for the treatment of acute pain.

Exalgo is a once-daily, long-acting form of hydromorphone, another pain drug.

Other controlled substances, including acetominophen-containing products

Medical Imaging products include Optiray (ioversol injection), an iodide based contrast medium for CT scans, and Optimark (gadoversetamide injection) a Gadolinium-Based Contrast Agent used in magnetic resonance imaging of the brain or liver.

As of 1988, Mallinckrodt was the only company in the US that is allowed to receive cocaine, which it has used to make cocaine hydrochloride, a prescription drug used in hospitals as a local anesthetic by eye and ear, nose and throat doctors.[11]

Price of Mallinckrodt's H.P Acthar drug dating back to Questor's acquisition of Acthar from Sanofi Aventis in July 2001 for $100,000.[4]

In December 2012, the New York Times in an article on Mallinckrodt's main drug H.P. Acthar Gel,[a] reported that "How the price of this drug rose so far, so fast is a story for these troubled times in American health care — a tale of aggressive marketing, questionable medicine and, not least, out-of-control costs".[42] In January 2017, the Financial Times reported that Mallinckrodt had made a settlement of $100 million with the U.S. Federal Trade Commission (FTC) in relation to anti-trust probes on Acthar, and quoted the FTC as saying: "Questcor [Mallinckrodt's subsidiary] took advantage of its monopoly to repeatedly raise the price of Acthar, from $40 per vial in 2001 to more than $34,000 per vial today – an 85,000 percent increase".[43]

In May 2017, the Wall Street Journal reported that U.S. investor Jim Chanos accused Mallinckrodt in relation to Acthar of being a "one-product company",[44] and the Irish Times quoted Chanos on Bloomberg stating that a "murky alliance" had developed between Mallinckrodt and distributor Express Scripts, who is the sole distributor of Acthar, and that "Acthar is the epitome of excessive drug prices".[41] In September 2017, the Journal of the American Medical Association (JAMA) published research showing that Acthar was one of the most expensive drugs in the U.S. Medicaid and Medicare system, but that most sales of Acthar were "driven in part by a relatively small group of doctors who were prescribing it heavily", and that alternatives at one-fiftieth of the price of Acthar were available.[4][45]

In April 2018, a whistleblower lawsuit claimed Acthar, which had never passed a modern FDA process as Acthar had been available for 60 years and was thus passed under FDA "grandfathering" rules, had an unknown formulation and efficacy.[b][36] The lawsuit claimed that this situation would not be sustainable without the support of Express Scripts.[36][47]

^"Mallinckrodt agrees deal to exploit Irish tax base". Irish Independent. 8 April 2014. Pharma firm Mallinckrodt has agreed to buy Questcor Pharmaceuticals for $5.6bn (€4bn) to add specialty drugs in the latest industry deal that moves a US company to Ireland for a lower tax rate. Mallinckrodt, with a registered headquarters in Dublin and run from Hazelwood, Missouri, will pay $86.08 a share for Anaheim, California-based Questcor.

^Liz Hoffman (7 July 2015). "The Tax Inversion Wave Keeps Rolling". Wall Street Journal. Horizon and other inverted companies are using their new, lower tax rates to turbocharge corporate takeovers. Applying those rates, often in the midteens, to profits of companies in the U.S., with a federal corporate rate of 35%, can yield extra savings on top of those traditionally wrung from mergers. Moreover, unlike the U.S., Ireland and most other countries, only tax profits earned in-country, giving companies the freedom and incentive to shift income to still-lower-tax jurisdictions.

^"Mallinckrodt won't give up Irish home". Irish Times. 8 December 2015. Mallinckrodt, which has a tax address in Ireland, said that it will pay a tax rate of 15 per cent to 17 per cent in 2016. That low tax rate can give the company an advantage when seeking acquisitions, though Trudeau said that’s not the primary impetus for deals.

^Jonathan D. Rockoff; Nina Trentmann (11 February 2018). "New Tax Law Haunts Companies That Did 'Inversion' Deals". Wall Street Journal. Under the law, U.S. earnings will be taxed at 21%, down from 35%. Citing the lower rate, Mallinckrodt PLC, a drug company based in the U.K. but with about 90% of its sales in the U.S., said it expects the law to be “neutral to slightly positive.” Mallinckrodt said in recent security filing it would get a $450 million to $500 million deferred tax benefit from the lower U.S. corporate rate, which would “mostly be offset” by the new limitations on interest-expense deductions.

^ ab"Mallinckrodt shorted by US investment group over Acthar drug". Irish Times. 19 May 2017. In an interview with Bloomberg TV on Thursday, Mr Chanos said he expects Congress will call for a review of Mallinckrodt pricing at some point. Asked to put a value on the company, Mr Chanos said: “We think it is zero.” Acthar is the most “egregiously” overpriced drug in the United States, he said, adding that he expects it will be replaced by generics in 10 years or that pricing will be lowered.

^Eric Palmer (13 September 2017). "JAMA piece resurrects questions over cost of Mallinckrodt's Acthar". FiercePharma. The research from the Oregon State University’s College of Pharmacy found that the blockbuster drug’s more than $1 billion in sales have been paid for primarily by Medicare and Medicaid for conditions that often could be treated with less expensive corticosteroids. Spending by Medicare for Acthar increased 10-fold and totaled $1.3 billion from 2011 to 2015, it found. On top of that, the research letter published this week in JAMA Internal Medicine found that Acthar prescriptions often were written by a relatively small number of frequent prescribers, raising questions about how it is being marketed to those doctors by Mallinckrodt.